Are Free Business Valuations Too Expensive?
Jacob Orosz from Morgan and Westfield asks an interesting question and goes on to explain just why brokers provide free valuations of businesses and why these presents a danger to the business owner.
The why is simple, of course. It gets you in the door and they can sell their services to you. The dangers with such valuations are less obvious.
Jacob starts by explaining that there’s no such thing as a free lunch and provides examples from the world of business as to why “free” always has a catch. But then he goes on to share his own experiences working in other firms where brokers manipulated formulae or otherwise ditched all objectivity in order to provide the client with the type of figure that would seal the deal and get them to sign on the dotted line.
What’s not stated in the contract, of course, is that the valuation figure provided is never a guaranteed figure. The broker cynically knows right from the start that aiming for that figure is unrealistic and that he can always find excuses later to revise the figure down. Jacob does a good job of explaining just how this is done.
Interestingly, the author offers several options on how you can get a valuation that is fair, objective and a reflection of the real price you’re likely to achieve if you go to market. Read the article here.
Related Article: Is This How Your Broker Values Businesses?